Bureaucracy Cost Measurement and Reduction Policy

Inefficient bureaucracy increases uncertainty in doing business and acts as a de facto tax on business activity – a tax which adversely affects entrepreneurship, competitiveness, growth, and living standards. Internationally accumulated experience demonstrates that countries which sought to reduce their "bureaucracy tax" in order to enhance economic growth have started measuring the cost of bureaucracy inflicted on businesses, using a methodology which is commonly employed worldwide – Standard Cost Model (SCM). Bureaucracy cost measurement necessitates an institutional structure which ensures sustainable, professional measurement. The predominant institutional structure in developed countries over the last two decades consists of a government department for regulatory optimization; an independent unit to monitor the measurement of bureaucracy costs; a professional agency in charge of systematic data collection; regulators in government offices appointed to execute the measurement of bureaucracy costs; and a government coordinator and an interministerial CEO committee tasked with supporting the attainment of national objectives and coordinating the various bodies involved in measurement and reduction of the cost of bureaucracy.

The Israeli government had began building the necessary apparatus for bureaucracy cost reduction and regulatory optimization when it established the Department for Regulatory Optimization in the Prime Minister's Office but failed to complete the process, particularly by declining to establish an independent unit authorized to monitor measurement, and to assign a professional agency with the task of data collection. Accordingly, the "bureaucracy tax" in Israel, as reflected in its ranking in both the Burden of Government Regulation Index and the Ease of doing Business Index, is significantly higher in comparison to developed countries.

In order to reduce the "bureaucracy tax" inflicted on businesses and to stimulate economic growth, our recommendation is to complete the creation of the institutional structure: establish an independent unit to monitor the measurement of bureaucracy costs which holds executive powers in regards to both new and existing regulation, and commission the Central Bureau of Statistics to carry out systematic collection of the data required to measure the cost of bureaucracy. In addition, we recommend that the governmental Department for Regulatory Optimization, drawing on the advisory powers of all regulatory officials, will act to optimize regulation according to the professional advice of the monitoring unit.